Department of Telecom left with 3 choices on spectrum usual charge

DoT though may also put up Trai’s suggested formula for the Cabinet’s consideration, but flag its strong reservations, an official told ET asking not to be named.Anandita Singh Mankotia | ET Bureau | Updated: July 18, 2016, 09:04 IST

DoT thus is left with three options to suggest to the Cabinet its own new weighted average formula, which includes 4G airwaves bought in 2010; existing formula, which treats 2010 4G airwaves separately while calculating SUC; or a flat SUC for all airwaves.

Officials say a flat SUC is the least likely to be accepted, as it runs the risk of being challenged in court, especially after the recent opinion of the attorney general.

The DoT though may also put up Trai’s suggested formula for the Cabinet’s consideration, but flag its strong reservations, an official told ET asking not to be named.

“The regulator hasn’t really made any specific recommendation. It has given an analysis of the situation and listed options we already had,” the official said.Trai had recently also suggested factoring in final bid value made in each spectrum band in computing SUC instead of merely using the quantum of airwaves held by telcos as a weight, as per the current DoT formula.

Trai, though, reiterated a flat SUC is the best option, but didn’t give a specific rate. Another official said the proposal of adding bid value to SUC may actually lead to various complications.

“Bid value is already paid by telcos when they buy airwaves, once again multiplying by a factor of bid value will mean duplication.” “This brings us back to square one, what SUC to charge?” said the first official, explaining the conundrum at the DoT.

The Telecom Commission, highest decision making body in the department, had first sought the AG’s view on whether it could charge a flat SUC of 4.5 per cent of annual revenue for all airwaves, including the 4G ones sold in 2010.

The AG had said auction rules of 2010 didn’t permit raising SUC for 4G airwaves sold then. This bandwidth continues to attract a flat SUC of 1 per cent while the government calculates SUC of all other airwaves for telcos as weighted average.

Industry experts say in such a scenario, DoT might actually have to just go back to its new formula, which had initially been presented to the Cabinet. One which included the 2010 4G spectrum in the weighted average formula.

“Either the department proposes a flat SUC; second, its own we ighted average formula, which it had presented to the Cabinet and third, continue charging separately for BWA (4G) and other airwaves, which is current practice,” said Prashant Singhal, global leader for telecom practice at EY.

With the AG’s opinion on 2010 4G airwaves in place, a flat 4.5 per cent SUC— as had been proposed by DoT —might not be doable. “If the government does go ahead and imposes a flat 4.5 per cent SUC, we are in all likelihood attracting a legal case,” the second official said, indicating Reliance Jio Infocomm could go to court, further pushing back already delayed spectrum auction.

Jio has previously said any move to change 1 per cent SUC rate for 2010 4G airwaves would be a retrospective change and would be illegal.

Moreover, even if the government does reduce SUC for all airwaves to say about 3 per cent , it will lead to revenue loss of almost Rs 2,000 crore annually. Thus, a flat rate would need to be a minimal 4.5 per cent.

Reducing it to 1 per cent , as sought by major telcos, isn’t plausible from the government’s revenue proceeds point of view, the second official said. “So, the question is not just whether a flat SUC or not, it is also what will that rate be?” said the second official.